Entry, costs reduction, and competition in the Portuguese mobile telephony industry [An article from: International Journal of Industrial Organization]

This digital document is a journal article from International Journal of Industrial Organization, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
We study the effect of entry on costs and competition in the Portuguese mobile telephony industry. We construct and estimate a model that includes demand, network, and cost equations. The latter accounts for inefficiency and cost reducing effort. Our results suggest that the entry of a third operator in 1998 lead to significant cost reductions and fostered competition. We also show that failure to account for cost reducing effort leads to biased estimates of competition in the industry. Finally, we also find that our estimated price-cost margins are similar to hypothetical Nash margins, if firms are patient and have optimistic beliefs about the industry growth.